For many individuals seeking secure and stable returns, fixed deposit accounts (FDs) have long been the go-to investment choice. However, there are instances when unforeseen circumstances require a premature withdrawal of these FDs. Sadly, such early withdrawals often incur significant penalties, which can eat into the expected returns.
In light of this, investors are now exploring alternative investment options that provide the advantages of bank FDs while allowing for penalty-free premature withdrawals. Smart Deposits have emerged as a viable solution to this problem. By eliminating the penalties associated with premature withdrawals, Smart Deposits offer a more flexible approach to investing.
It is crucial to understand premature withdrawal and its pros and cons. Smart Deposits provide a means to avoid these penalties, ensuring that investors can access their funds when needed without suffering financial setbacks.
By opting for Smart Deposits by Koshex, investors can strike a balance between security and flexibility, enjoying the benefits of FDs while having the freedom to withdraw funds without incurring hefty penalties.
What Is Premature Withdrawal?
Premature withdrawal refers to the withdrawal of funds from a fixed deposit account before the completion of its predetermined tenure. Fixed deposits are designed to be held until maturity. However unforeseen circumstances may necessitate early withdrawal of fixed deposits. This can include emergency medical attention, marriage, education, etc.
Consequences Of Premature Withdrawal Of FD
The consequences of premature withdrawal can be quite significant. Most banks and financial institutions impose hefty penalties or charges on premature withdrawals. These penalties are typically a percentage reduction in the interest rate applicable to the deposit or a flat fee deducted from the principal amount.
It varies from bank to bank and the penalty can be anywhere between 0.50% to 2% of the withdrawal. As a result, the investor receives a lower amount than expected and may not achieve the desired returns on the investment.
Disadvantages Of Premature Withdrawal Of FD
Premature withdrawal of fixed deposits can have several disadvantages for investors. These can include:
Financial Loss: The penalties associated with premature withdrawal can lead to a significant financial loss for investors. The reduced amount received may not cover the initial investment amount or meet the intended financial goals.
Impact On Savings Goals: Premature withdrawal can disrupt long-term savings goals. It may force you to seek alternative investment options with lower returns or compromise your financial plans.
Lost Interest: Withdrawing a bank FD prematurely means missing out on the compounded interest that would have accrued if the deposit had been held until maturity. This loss can have a long-term impact on the overall returns.
For instance, if you invest Rs. 1 lakh in FD for five years @7% interest rate, then you will receive Rs. 40,255 as interest after five years. However, if you decide to withdraw after five years, then your interest earnings will be Rs. 31,079. That’s a Rs. 9,000 interest loss for just one year.
Avoid Penalty On Premature Withdrawal Of FD In Three Steps
While penalties for premature withdrawal are a common practice, there are a few strategies to avoid or minimize them. These include:
Planning for contingencies: Adequate financial planning can help individuals avoid the need for premature withdrawal. Building an emergency fund or maintaining liquid assets can provide a safety net during unforeseen circumstances.
Opting for shorter-term deposits: Instead of committing to long-term FDs, you can choose shorter-term deposits. This way, you have the flexibility to reassess your financial situation and renew or reinvest the deposit at higher rates if needed.
Exploring partial withdrawals: Some financial institutions offer the option of partial withdrawals of your investments. Here individuals can withdraw a portion of the FD without incurring significant penalties. This allows them to meet immediate financial needs while keeping the remaining amount invested.
While the above count as good strategies to avoid premature withdrawals, we need to find a permanent solution to avoid the penalties. This is where Smart Deposits come into the picture.
What Are Smart Deposits?
Smart Deposits are new-age investment avenues that are gaining popularity among investors. They are a fixed-income product offered by Koshex. Just as the name suggests, Smart Deposits offer fixed returns ranging from 8.25% to up to 12%. These deposits are designed to provide investors with the flexibility to withdraw funds without any charges and ensure that they have access to their money when needed.
Advantages Of Smart Deposits
Smart Deposits offer several advantages over traditional bank savings accounts and fixed deposits. Here are the key benefits of Smart Deposits:
No Premature Withdrawal Charges: The most significant advantage of Smart Deposits is the elimination of premature withdrawal charges. This means that investors receive the full principal amount without any reduction or penalty if they withdraw seven days after investment. This flexibility ensures that investors have access to their money when they need it, thus providing a sense of financial security.
Instant Withdrawals: With Smart Deposits, you can withdraw your money at any time. Koshex offers different plans, with the tenure of the plans ranging from one day to three years. This makes Smart Deposits a convenient option for every type of investment horizon. Also, if you wish to withdraw your money, your funds will reach your bank account within 24 hours, provided the request was given on a working day. Thus, you can say that it’s as good as a savings account.
Competitive Returns: Smart Deposits offer competitive returns that are higher than conventional fixed deposits and they carry little to no risk. Investors can earn fixed returns on their investments without the worry of penalties on early withdrawals.
How Smart Deposits Can Save Penalty on Premature Withdrawal?
Smart Deposits address the issue of premature withdrawal penalties by eliminating them. Investors can withdraw their funds at any time without incurring any charges or reduction in the principal amount. This feature allows you to have the desired flexibility while still earning competitive returns on your investments.
Further, you can withdraw your investments at any time you want. Smart Deposits ensure that you have the freedom to use your funds as per your financial requirements without any financial consequences.
In A Nutshell
Smart Deposits are an innovative way to solve the problem of premature withdrawal penalties with conventional fixed deposits. These innovative accounts offer flexibility, competitive returns, and zero charges on early withdrawals.
By opting for Smart Deposits, you can have peace of mind knowing that you can access your funds when needed, without sacrificing the full value of your investment.
Koshex is one of the leading platforms that provides the facility to invest in Smart Deposits. It allows you to invest an amount as low as ₹25,000, and you can choose from six different Smart Deposit plans that suit your unique needs and preferences. Smart Deposits at Koshex are offered in partnership with Faircent, a leading P2P lending platform. Since Faircent is an RBI-registered NBFC (Non-Banking Financial Company), you can rest easy knowing that your money is safe with us. Start your investment journey with Koshex today and let your money work for you!
FAQs
Q: Are Smart Deposits available at all banks and financial institutions?
A: Smart Deposits are a relatively new offering and are offered by only select financial institutions. You can invest in Smart Deposits through Koshex, a state-of-the-art wealth management app. You can select from six different plans that offer fixed returns ranging from 8.25% to up to 12%.
Q: Do Smart Deposits have a lock-in period?
A: Smart Deposits have no lock-in period and you have quick access to cash anytime, anywhere.
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